Category Archives: Finance

March 3, 2013 · 16:51

March Hare of Government

Most of us have seen the news and heard the messages of the sequester cuts for the US of 85 billion dollars. How so many are now up in arms.
Let us be honest! This is all a load of rubbish (imho)! The deficit is 16+ trillion dollars. At 0.5% interest annual interest should be well over 80 billion a year, so they are still skating backwards if only 0.5% interest was due. In reality, as we doubt whether the US will EVER correctly deal with their debts we could consider the fact that it should be a lot higher than that. Also, important that even at 0% interest, it will take 200 years to get rid of a deficit this high. Are you awake yet?
I already mentioned it in 2011 that America was joining the 3G nations (nations that will need 3 generations to get rid of their debt). I was not alone in these thoughts; people like Glenn Beck, Bill O’Reilly and others were on THAT bandwagon as early as 2010. No one listened, all claimed it was not that bad, and it is now shown more clearly on a daily basis that it is getting worse. Yes, a March Hare is in charge of US Government. Oh Boy! The US is not alone in this situation, that same Looney Tunes character, created by Lewis Carroll seems to be in charge all over the commonwealth too. You know, those smaller world leading countries like UK, Australia and to some extent even in Canada. Lewis would be so delighted that he could have added in the cover of his book “These characters are based on leading individuals of the British Empire and those bloody colonials” (sorry US, I could not resist this).
First of all, for the next part, you must realise something first: “I AM NOT A RICH MAN!”
All capitals, I insist! The issue is that I am on the Republican side in this. It is also why I am so angry in regards of the (imho) the statement, which i consider to be BS, voiced by President Obama all over the news. He states “This was not necessary”, I say yes it is. He has overspent to such a degree that these cuts are essential for that nation to NOT go bankrupt. It is also linked to my life philosophy. I have always believed in being a Return on Investment. I get a job and that boss makes a profit by having me. I have worked on dozens of projects every quarter for over 20 years, and my bosses made more than just a small profit. This is how it should go. A company makes profit and that company continues and its staff members have a job. I believe in this simple premise with all my being.
You might think it is a simple and naive approach, but consider to alternative from the financial industry. They play markets on assumptions and reap benefits on image and commissions on a premise, not a given, and not on an actual creation of wealth. That was shown by Goldman Sachs in the 2008 issue where they banked on bad credit and foreclosures to make quick cash. All legal, but that should never have been allowed. This part now reflects back to the US government as these loop holes are still NOT stopped, and they just keep on grabbing from the wealthy and not from the immoral. These two groups are not the same.
This is however, not just about the US. the UK, Australia, the Netherlands, Italy and even France are going in EXACTLY the same direction. In the Netherlands on March 1st their Easter Bunny surprise is about to show the nasty side as it might go into a burnout as they are trying to find 4.3 Billion Euro in cut backs. Not unlike the US, they have been overspending for almost a decade and instead of taking heed then, they left it until they were no longer in office. You just need to check the Dutch newscasts between 2009 and 2011 to see dozens of articles “GroenLinks: bezuinigen is helemaal niet nodig” (the Greens state that cutbacks are not needed). These were often specific issues; however, the overall clear issue is that cutbacks were left too late. Any doubts? Consider that 250 million Euro annual cutbacks in 2008 onwards could have prevented a 4 billion cutback almost essential now. I use the word ‘almost’ as the method of cut backs is nearly always a debatable thing. All parties are passionate on protecting THEIR groups, but some must give in to the needs of cut backs. The CDA (Christian Democrats) are actually voicing a lot like the Republicans. It cannot remain about cutbacks; it must be about proper spending of what is available. So here we have our first direct link.
Two parties who I personally never really agreed with are voicing a solution that is simple and clear. I am NOT against taxing the rich to a certain degree (I am not rich, so fair enough). But NO nation can continue when the rich are taxed to such a degree they move away to other liveable lands. And in all fairness, that group is small. So small that taking them another 1% will NOT EVER get the government the money mountain they need. Should you doubt this, and that is fair enough, one must always question things, consider 1% to make 85 billion needs an Income group of billionaires making a sum of 8.5 trillion dollars. The US, UK and Australia combined do not have that amount of billionaires. This is the empty cloud that Democrats are offering. Which is why I oppose this mindless action. Spending needs to be put under control for a long time, long before 2011. I will state that this is not all President Obama’s fault. He did inherit a bad situation and that must be stated if we look at this honestly. I believe he truly thought that his approach to the bad economy was the best solution. I cannot fault or blame ideology. Yet, 4 years in office showed so clearly that this was NEVER a solution. So why he is continuing that method in his second term is in all honesty beyond me.

So, now let us add the next shackle in this chain. The UK and Australia are already feeling the weights of healthcare. In 2011 the UK had a population of 60 million people. For the period 2010-2011 the NHS had spent 51 billion pounds (as mentioned by the UK department of health). That almost equates to 1000 pounds per person (roughly $1500). A large slice of the UK population never gets sick or treated, yet the group that needs healthcare therefore required more than the 1000 pounds. This figure will shift as the population is growing old and grey. It is clear that the NHS will need more and more money, which is a clear reality many nations face. That links back to US healthcare. Whether it is labelled as Obamacare, as Healthcare or whatever coat of labelling it needs. Forbes reported in 2012 that US healthcare was set around 3 Trillion dollars. Now take a population of 325 Million in the US. Then we see that 1500 dollars do not get us anywhere near the needs of the UK. We can make two conclusions. Either the average American is very unhealthy, or that Medicare in the US is vastly overpriced.
OK, I admit that this equation is very simple and there are more factors at work. However, I hope that it is clear to most that something is wrong. I have stated before that the US seems to be a greed driven society (even though it is mostly visible in Banking and Financial Institutions), Shakespeare would state that there seems to be a stench coming from the state of budgeting (Hamlet banking association, 2008). Just to be certain you do not get the wrong impression, oddly enough Nurses seem to get the smallest part from that barrel, so they are constantly being underpaid (a global truth), so where does all the money go?

The next is generic and not just connected to healthcare. There seems to be too many managers in a company. If America is a ship, then the President is its captain. That is simple and clear. It is however an issue that this administration could be regarded as a badly stocked Titanic with 132 Pursers, 373 stewards, 83 cooks, 227 barkeepers, 93 janitors and the odd Marshall. The issue is that the paying crew is roughly 2000. This could never continue. When the servicing crew is at almost 50% of the paying customers, then either this population starts paying a hell of a lot more, or the ship sinks. I hope that this comparison is a lot clearer. It is actually close to the comparison as the RMS Titanic was populated. Yet, that ship was mostly designed for the indulgent and the wealthy. I hope that some will remember what happened. 1502 people died there. The numbers almost equates that one crew member saves one passenger, the rest is out of luck (I am NOT stating that this is what happened on the RMS Titanic). That is however how the US economy is seen by many. The numbers are a little harder. They are unclear on how many people lost their homes and never got another home. The numbers add up into the millions, and it seems to be around that one in six lost a home forever. So one government worker saves one citizen, the rest is out of luck. This seems to be the Nanny state as some call it. Funds for all! Yet, when no money is coming in, that nation gets shut down real fast. All nations depend on actual money making contribution to survive.

This is how 2013 is starting for the US. The bad issues coming is NOT because of some sequester. It is NOT because someone reports moderate growth. There is a collection of machines left, right and liberal trying to get what they can secure. We can look at Heidi Moore of the Guardian or Maxwell Strachan of the Huffington post. There is long term of financial pain coming and no one is safe. Yet, in all this, it is interesting how some ‘experts’ like Agentschap NL and NABE seem to predict a +2% growth in 2014. What is this? The land of the Umpa Lumpa’s?

I would love those numbers to be realistic. It seems however that those ‘experts’ are more and more moving to the mindset of market research where they seem to present what a government would like to reflect then to the area of research where we reflect the actual facts. Neither is a lie, but one is very very incorrect. All governments want to see nice indications, so they can forward the invoice. That time is gone; we have overspent for too long. Unless spending is reduced greatly, and fat is cut all over we will not see any good growth. If you doubt that, then look at the issues now going on all over Europe as horse meat is added to ‘expensive’ beef. When the daily issues of life are frauded on, then they have met rock bottom. There is no way you can ignore that (as far as I know it takes twice the time to grow a horse to adulthood, compared to a cow, which makes me wonder what on earth is ACTUALLY going on).
So let us get back on that horse steak and drive back to the so called ‘financial growth’. The seen level of misrepresentation is exactly how we move towards the Abyss. Some of those ‘experts’ might point to such good profitable places like China and India where things are currently so prosperous and how we all could be this successful. They are deceiving YOU and delusional towards themselves. You see, YES, Those two places are going forward, and 10,000 new millionaires seem to pop up. Yet, this is due to them voicing the need of outsourcing. WE lost those jobs (perhaps forever). They were cheap, and like on any ‘slave’ farm, there are guards and overseers getting a fair wage for every 10000 workers who are getting mere pennies (in comparison). Now consider that one third of the global population lives in those two nations. So that number of 10000 millionaires seems ‘fair’. Now add to this, a consumer market that could be slowly collapsing. We now have the means for that iPad, Ultrabook or iPhone, but is that still possible in January 2014? Soon this curve will level and then I expect it to decrease. Whether the decrease is short term, or long term I cannot foresee at present (there is no way to tell). But from my point of view it seems that America with their 200 years of debt would be living on slim margins for a very long time to come. If the Commonwealth and the EEC do NOT severely change their budgeting habits we will end in a similar predicament. Make no mistake; America will happily push US over the edge to survive a little longer. Then what?

We need to get a lot better and clever on how we do business and how we govern. My worry is that too many politicians on a global scale are not willing to consider that, especially if they and their constituents have to cut back.

Leave a comment

Filed under Finance

Tagged as , , , ,

February 28, 2013 · 17:52

The military Pound

We do not need to look far to see that cut backs are more than just the talk of the town. They have been the talk of nations for a long time, and we have seen more than one system discussed when it comes to the need for overspending.

So, when many read about the fact that the military overspend again we might not have looked to be too overly surprised. It is however the proverbial straw that is breaking the camel’s back. This is what was said on Sky News on Feb 28th “Britain’s Ministry of Defence has been slammed after a report showed between 2009 and 2011 it bought STG 1.5 billion ($A2.24 billion) worth of equipment more than it used.“

The article was short, to the point and ended with “The ministry is to introduce controls that it hopes will reduce spending on inventory by STG 500 million a year by 2015.“

So, the British consumer will be confronted with taxation on overspending by almost 2 billion until that time? How is that fair. This is not the end of it. There is a lot more. This is the clear part where we are confronted with overspendings; however, there are a few more issues at play.

The New York Times published a story in July 2006 named “Pentagon Struggles With Cost Overruns and Delays“. In this example they went over the costs of the F-22a Raptor. It was a track from 1991 until 2010 that showed a massive amount of overspending. The response as stated in the New York Times was “We must transform the way the department works and what it works on, he said. It could be said that it’s a matter of life and death — ultimately, every American’s.“

So was that an answer? It seems not. Because that same story repeats itself when we look at headlines involving the F-35. “$24 billion British budget blow-out in black hole F-35 project“.

It seems that the boys in uniform seem oblivious to words like ‘common sense’, ‘budgets’, ‘overspending’ and you know, words of that general direction. Now I am all for a good defence, yet the parties involved seem to be either completely academically ineffective (incompetent seems too hard a word), or those paying are really lacking a certain level of backbone. Especially when budgets are overstretched the way they are. Am I having a go at the Australian and UK admin soldiers? I am not sure. Who made these decisions? Who allowed for these levels of overspending? These are serious questions that need answers and it needs more then investigation, it requires ACTUAL actions being taken. I am not talking about some political inquest wasting even more time and money. No! Defence needs to take a look at their laundry and fix this. It seems clear and shown that this needs fixing on several levels.

In the meantime solutions must be found, especially when it is clear that almost all parties in the commonwealth have to tighten the belt on budgets all over the place. It seems very unfair that even though the military are to most the visible part to defend a nation, the people placing their lives in harm’s way on a daily basis are having their budgets cut severely.

You know, I have a nice idea, right out of the extreme right field. Lockheed Martin donates 1% of paid costs by the DOD to the Metropolitan police as a show of good faith. Not all will be happy with this idea, but several will be less unhappy and the way the costs are cut especially to the police departments. It seems only fair. Who knows, Sir Bernard Hogan-Howe might arrive in the office on a Monday morning holding on to a cheque and wearing a large smile (be not afraid if that happens). The same could be done for the RAAF. I reckon Commissioner Scipione might be happy to know that in the end, overspending almost 30% per F-35 unit (an unacceptable amount of overspending per unit) the police force will get a small shiny future. The other option is for the RAF to order 14 less F-35’s and the RAAF orders 2-3 less and these police departments get those funds directly.

There is however a deeper part to those rumours. Is the F-35 too overpriced and are we moving to a previous model (the F-22)? Even though several sources implied certain noises, there is no real knowledge at present (or better stated, known to me) that this is actually happening. It would be interesting as the NY Times reported that the F-22 had its last delivery in 2010. If so, should we pay full price for a model taken out of production? Would you pay sticker price for a 2010 Toyota? This seems more than a little unfair. Not to mention that we seem to reward/ignore a blatant budget overrun for two planes by the same company. A ‘ploy’ they seem to have handled since 1991. That means they did not seem to have cleaned up their act for two decades.

So we have two issues.

1. Commonwealth armies seem to be overspending by a lot and on needless things.
2. Commonwealth armies are confronted and left with much higher bills by their suppliers.

I am not claiming that the military are doing this on an intentional basis to waste money, but it stands to reason that we should ask questions when the size of the British forces is set around 225,000 and there seems to be an annual overdraft of 800 million dollars. The Australian Defence forces are not without fault either. This was mentioned in an article by the SMH, however I personally thought that this article asked more questions on the numbers they reported, then on the actual issue.

There is another side to this, and this was voiced by President Obama on Feb 19th as mentioned in the Guardian. “Obama warns Congress over spending cuts: ‘People will lose their jobs‘”. This is not an unfair statement. Yet the issue that is not mentioned is that overall, the profit margin for those companies is often a lot larger than most commercial companies seem to be left with, and THAT part seems to have never been curbed. That was illustrated in an article in Aviation week by Joe Anselmo on May 18, 2012. There it was quoted that “A Wall Street research firm says defense contractors should be able to maintain their profit margins even as Pentagon spending declines“. That seems to prove the thoughts that others have as well as myself. So, these are not unique thoughts. These are thoughts that have been in play for a long time, so when we are looking at recessions and budget issues, it seems to me that there is at least one player in town who gets to play with a stacked deck.

I hope the message is getting through. There is a massive amount of needless overspending and there currently seems to be no planned solution to properly curb this enthusiastic method of an open wallet policy.

1 Comment

Filed under Finance, Military

Tagged as , , , , , , , , , , ,

February 27, 2013 · 13:49

The ugly unspoken truth

It is nice to get your thoughts confirmed. So, my ego was taking a nice leap forward when I saw how ministers all over Europe agree with my views on blogs I had written in the last few months. Foreign ministers Margallo from Spain and Westerwelle from Germany as well as French Minister Moscovici from France voiced pretty much literally the issues I had on several finance issues plaguing debt driven Europe. The Italian election is not as much a solution as it has now become an issue of less trust and security then before the elections.

So, it is nice that they agree however, the issue I have is that the Italian population seems to ignore that THEIR predicament comes from massive irresponsible spending. The other part is that Germany, when needed did tighten the belt and therefore they are now in such a strong state. Other nations are still fighting with issue they have (like the Netherlands). This is not because they are not doing anything, but because, from my humble opinion, they started too late, and as such they are now in this ‘mess’. They still have more issues to come. As they reflected that 2014 would bring a 1.1% increase, my thoughts are nowhere near that optimistic. I cannot vow on the issue that they are wrong, yet, over positive thinking is a hampering Anvil for them. I would think that if they could pull of a 0.3% positive growth in 2014, then that might be nothing less than a decent miracle.

Whether they get this through ‘clever’ bookkeeping is to be seen. Even in the most optimistic events. This means that the Trade ministry would need to get their International options like in Qatar and Bahrain. This would definitely help towards the 0.3% growth but not the 1.1%. In addition, the issues currently plaguing the gas winnings in the state of Groningen could hamper income for the Dutch government. They reported over 11 billion euro revenue from gas. However, as areas in Groningen were disturbed by Quake’s that seem to grow in intensity due to the method of extracting, could have two effects. First it is not inconceivable that revenue from Gas might fall below 10 billion, as well as the fact that damages from these quakes mean that payments well into the millions would be added as costs. In addition, there have been newscasts that current events are NOT events the current industry buildings are protected against, so not limiting gas extractions could have far fetching consequences. Not just to the revenue, but also to an area with culture and architecture that is quite unique to that nation.

The final straw is the involvement of the RABO bank in the LIBOR scandal. They have been given a penitent company donation of 330 million Euro. Even though they are not state owned like the SNS, there will be consequences. The first one would be whether Moody will adjust the bank even further. It was downgraded in June 2012 from AAA to AA2. Will the fine as well as the implication of lessened revenue and profit (as resulted from the LIBOR effect) mean this bank is downgraded even further? That part I do not, and do not claim to know, but it stands to reason that additional drops in government donations (read paid taxes) will dwindle a little. All these facts mean that the target of 3% budget deficit is not likely to be achievable. This links of course to the issues in Italy. As they miss their targets we are now with 2 players who become a question mark and Italy being number 3 on the ranking list of Europe, THAT impact will be a prominent one.

This European cart which is in definition pulled by the current two champion stags (France and Germany) will only slow them down too, meaning that a strong European economy (or at least less debt driven) is not likely to become a reality before 2016. If I had any faith in my predictions (remember, I am not an economist), then I would speculate that 2014 will be Europe’s hardest year. Not because of the economy as it gets through 2013, but because the drag from 2011 through to 2014 will have exhausted both people and companies to the brink of collapse (of financial exhaustion). For those thinking that I am so far of the mark, consider the greying population and the issues they are already in a group that cannot make ends meet in January 2013. The issue here is that this is not limited to places like the Netherlands and Spain. A fear of clear shortage is also hitting France, Italy and Germany. It will be hit on both sides of the equation. On one side, there is a clear danger that less money can be paid towards pensioners and stronger on the other side is the ever increasing cost of living. Whether it is because of food, Electricity and/or gas/fuel prices. Retiring before 2018 does not seem to be a healthy option, and NO guarantees are forthcoming any day soon.

Leave a comment

Filed under Finance

Tagged as , , , , , , , , , ,

February 10, 2013 · 01:14

The Italian menace?

The Italian menace?

Just when you thought it was safe to think of any kind of future again, the abyss opens up right in front of you and your savings are again in danger.

The first topic of discussion as presented by the Dutch NOS was of course the European budgets. To a budget of 960 billion, the Dutch contribute 6 billion and they got a one billion dollar discount. Yes, this seems to be the Marks and Spencers approach to budgeting. Now, they seem to be happy, and I am not sure how to feel. It does however give a clear picture that the Dutch, always visible as a high player, are anything but that big. When you are profiles as a larger player and their contribution is less than a tenth of 1 per cent, that it means that they are not that big a player at all (or so it seems).
So, the Dutch politicians are going home with a satisfied feeling until the end of the decade. So how is this impacting? It is what followed that could become the real worry. It is a newscast of the return of Mr Berlusconi. Yes! He is returning to Italian politics with elections less than 3 weeks away. Does he have a chance? Not sure and not really my worry to be honest.

What is interesting is how he pulls people in with his dreams of giving back the real estate taxation of 2012. So, if that is done then Italy would be withdrawing from their promise to get their budget and deficit under control. If that happens, then what is next for Europe?
The bigger issue is that this might be a clear indication that Goldman Sachs is back and actively trying to meet their share in the Game of Greed.
They seem to be a clear controlling and influential party with most European governments. Forbes already reported this as a ‘danger’. They did mention the Monte dei Paschi banking scandal as part of their news cast as well. They also remained soft in their ideas of nations no longer being governable. I am less subtle. From my viewpoint I am willing to contemplate the opinion that the European governments are about to become the bank’s bitches with Goldman Sachs leading them the way to population enslavement. I agree, the thought is a little strong!

You see, there is method to my madness, or my madness is methodical (either way works). So, let us take a look at how I got to that conclusion.

In the Dutch newscast on this, as well as in Forbes and as well as mentioned in other sources “Berlusconi, who said he won’t seek the executive position but rather prefers to become Finance Minister, has seduced the masses saying he will repeal a property tax imposed by Monti, returning about €4 billion ($5.4 billion) to the people by refunding taxpayers’ 2012 payments” so with all the shortages, they add to the non-debt resolving side. We can debate whether it is the right or the wrong thing to do. In my view it is an Italian choice and it is their right to choose. Whether right or wrong, it is however interesting that Berlusconi seeks the Finance Ministers position. With him being a connection to Goldman Sachs as a (former) international advisor? It also means that the Italian deficit will be upped by another 5.4 billion dollars. This implies that Italy is less interested in getting their deficit down.

My issue is that according to the numbers Goldman Sachs is one of the banks retaining their gains these last years. I have nothing against that as I do have a capitalistic side. There is however a realistic side to profit, and many greed driven organisations seem to remain very unrealistic. With the ties he had/has, and the rules of the game so unaltered. I worry about what will happen to the Italian debt during the next government term.

Here is the link between this all. This was discussed by the Independent. “What price the new democracy? Goldman Sachs conquers Europe”. In there they made the following statement: “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.” (Nov 18th 2011). I could not have said it any better.

Now we get to the juicy part. Should Berlusconi get elected, and then we will suddenly read on how certain realignments of bad banks will be needed? There will be a change, and of course Goldman Sachs will get their share. It is all nice and legal. No matter how they react, whether Europe breaks apart, whether the costs will once again be set into other places. We are looking at an additional total debt increase of half a trillion dollars (across the EEC) and Goldman Sachs will get their share. So why are the European legislations not dealing with this clearly visible weak flaw?

Now, here is where I get to go on thin ice. The conspiracy theorist in me might think that this is what the power players from the US had in mind from the beginning. From their point of view governments are obsolete! Especially when these governments are getting in the way of highly desired profits, commissions and personal wealth goals.

Politicians seem to get pushed into an ego trip (in some cases they are simply with their backs against a wall). They do not cover their budgets and get the back of these strong players to get visibility and media to do the things that should be investigated and questioned on many levels. The Dutch SNS was a clear example. However other banks and acting parties should not be forgotten. The ABN/Amro Bank was one of these banks that required nationalisation. They are linked in all this with connections to the Royal Bank of Scotland (who was having a nice go at acquiring ABN/AMRO). And again here comes Goldman Sachs around the corner, having a nice juicy finger in all of these matters. They were in an investigation regarding Collateralized Debt Obligation (CDO) traders. They were not guilty, as some people forgot to disclose certain matters. However, the LA Times reported this on October 12th 2010: “Hedge fund operator John Paulson a key player in SEC case against Goldman Sachs. His firm made $15 billion in 2007 by betting that Americans would default on their home loans in droves.” From my point of view, that is not all they betted against.

Why am I so against Goldman Sachs? The issue is not Goldman Sachs; they are not breaking any law. It is the politicians that walk away with golden futures, creating bad banks and leaving the population to work of the debt through taxation, a population left with forever less and less. Soon this can no longer remain affordable and Italy seems likely the next one moving into this direction. This is where banks and large corporations become in charge and we get to work past retirement ages to fill the need of their greed. This is a need that is eternal and will never be satisfied. If you doubt me, then look at the list of nations that was able to keep their budget. It seems that only Belgium made their budget, and that might only have been because they were without a parliament racking up cost for the most of 2011. They even celebrated their new parliament after a record 541 days without a parliament on December 11th 2011. So that would definitely helped in keeping the cost down.

So back to the headline I started with “The Italian menace?”
Is it Silvio Berlusconi the menace? Possibly! If he continues on a path that does not stop the rising debts.
Is Italy the menace? Possibly! If they do not get a handle on their debts. In this case I mean a solution where they pay for their massive overspending from more than the last decade, mostly under Silvio Berlusconi.
Will the Italian menace end the EEC? Likely! If debts keep on rising, and as insurmountable debts are taken as write off’s against retirement funds and national treasuries. It is not impossible that Italy becomes the straw that breaks the camel’s back. Should you consider that this could never happen, then think again. The same was said about the SNS bank and that puppy is now a nationalised one (but it seems that for now it is not house broken).

This has happened again and again. This is not just about the banks. Politicians are also to blame. For that I would like to mention papers like “Investing in Greece: an Olympic opportunity”. It came from Costas Bakouris in 2001. The thoughts were all fair enough. However, how much came to happen? How much money did come in?

Most facts point towards the information that the Olympics cost double from what was budgeted and out of the amount approaching 10 billion a lot less then budgeted came in.
There was the article called “Business and investment prospects strong after Olympic Games triumph” Which was released after the games of 2004. In December 2004, through the newspaper USA Today. It was published in December 2004. The interesting part of the second story is that there was no name attached to it. So what was THAT source?

Even though the Olympics are a unique event, the financial consequences are real and high. Yet, there were no visible budget cuts and massive cuts were required. But wait, here is super hero/villain Goldman Sachs to help with the presentation of it all.

The Olympics were the most visible, but not the only one. This is what Felix Salmon wrote for Reuters on February 9th 2010 (exactly 2 years ago). “It’s a bit depressing that EU member states are behaving in this silly way, refusing to come clean on their real finances. But so long as they’re providing the demand for clever capital-markets operations like these, you can be sure that the investment bankers at Goldman and many other investment banks will be lining up to show them ways of hiding reality from Eurostat in Luxembourg.”

In that time, banks wrote cheques for investment events no one could cover. This is clearly shown in the case of the Dutch SNS. And the fun does not stop here. The article “ABN Amro hiring spree targets Asian private wealth” 29 January, 2013 Written by Elliott Holley shows that they are hiring again, with at least 1 person from Goldman Sachs. It is interesting how this small circle gets to go everywhere.

Goldman Sachs does not seem to have broken any laws. Politicians all over Europe seem to have changed very little, and they seem to all extremely willing to get into bed with Goldman Sachs, their ‘golden’ solution. National politics does not seem to regulate banks to the degree that is needed and some governments do not seem to properly regulate themselves either.

When we look at the 2011 EEC numbers we see the following: the largest government deficits in percentage of GDP were recorded in Ireland (-13.1%), Greece (-9.1%), Spain (-8.5%), the United Kingdom (-8.3%). Whilst the Government debt kept on going up and was set at 10 421 987 million Euro, which boils down to 82.5 (% of GDP). (Source: Eurostat News release 62/2012 – 23 April 2012)
They also show that Even though the GDP was set to become negatively in 2012, it had been forecast slightly positive in 2013. There is no proof of that, and whatever taxation was acquired in 2012, Berlusconi wants to hand that back to the people. Consider these numbers. Now add three facts to this equation.

1. The LIBOR scandal (see previous blog) shows how within the UK the percentages had been tweaked. This means that the percentages were incorrect. Now consider that the LIBOR is based on 4 times the planets GDP (adding up to 300 trillion $ as mentioned in several articles).

2. The GDP is the market value of all the final goods and services produced within in a country in a given time period. We have seen how people are without work. Economies are shrinking and services are lost to families all over the EEC. So how does that number keep on going up?

3. The European Economic Forecast, Economic and Financial Affairs (Spring 2012) document shows a picture again way too optimistic. In several nations it seemed to predict that 2013 was a year when things would be turning up. There is NO sign that this is happening. The belts are tightening in nearly all European nations. In addition, when we consider the SNS Property moving into Bad banks, we see that the current need for business property is diminishing due to lack of revenues. From my point of view it implies that the mentioned government debt at 82.5% of GDP (2011) could be as high as 90% of GDP. If that is true, then the overall percentages will hit all harder as the interest rates for government debts should be higher, and their credit ratings might be lower as a consequence.

Now consider that should the debt grow and their rating goes one level down, then that nation might have to pay a percentage on their debt. With governments owning hundreds of billions, an example means that a debt of $300B, if the interest is only 1% that would come down to an annual payment of 3,000 million, just to keep it stable. That means every person pays between 50 and 300 dollars to pay the interest. EVERY PERSON! Now consider that this is not a real problem for most people, however Consider that in Spain 24% has no job, that means that this amount will be paid by 75% of the population with income, so they pay more now. Then consider that the debt needs to go away.

We cannot trust banks as LIBOR shows. The EEC papers show them to think of them in a better state then they are, and the presented numbers are debatable. And as shown from several sources Goldman Sachs is connected to nearly every stage, somehow in some non-criminal way.

So two years later (after the claim by Felix Salmon), where are we now and what bad news is yet to come?

Leave a comment

Filed under Finance, Law

Tagged as , , , , , , , , ,

February 7, 2013 · 15:11

Banks, eunuchs of a new congregation

The times are still all over the place. As I finished the 5th part of my previous story, the stories from SkyTV UK and the news by the Dutch NOS started to hit my TV. The thoughts I had on issues that are currently playing out are nowhere near done. I get the distinct feeling that this is far from over. It is almost that there is a voice whispering in the ear of Dutch Finance minister Jeroen Dijsselbloem. The whispers seem to be about the Bad Bank and the whispers could involve Goldman Sachs. There is no doubt that this man knows his stuff. He got his finance papers in Wageningen, a renowned and highly respected Dutch University. There is however more at play. I know it is a personal feeling and I am not an economy graduate, so there are plenty who can run circles around me in this regard.
The first part is that this idea comes from Goldman Sachs. Is it wrong to call a spade a spade as the expression goes? This firm together with the Lehman Brothers were the massive cause of something that had us reeling in 2008, and this is not over, not by a long shot. THAT damage will take decades to overcome. No amount of fancy bookkeeping can brush this under any size of carpet. This is however not about emotions. That path will never ever give any solution. My issues remain clinical (or at least I am trying to keep them that way).
Consider the banks are all allowed to get all their failings into a small rejectable corporation. These costs should be paid by the failed implementers. Not the government, not the taxpayer. The bank must pay for their blunders!
If this continues as it currently seems to be going, then we get a legal situation where high risk bad ideas can just be written off the books and straight onto the taxpayers list of to pay, whilst those responsible will ever show improvement. Those people will just keep on playing high risk games. That had been shown already. This thought was also mentioned by Rolfe Winkler at the New York Daily News. How is it even possible that a company that seems to have been one of the major reasons for the financial meltdown be regarded, or even ALLOWED to make any continued presence?
Wherever I looked Spain, Netherlands, Ireland, and perhaps even more places. Goldman Sachs keeps on being named as a primary advisor. How many bad banks are there in America?
Let’s take a clinical jump into health care. Would the Dutch Minister of healthcare Mrs Edith Schippers consider someone for a position? You see, I know a person (well, kind of). Brilliant physician (so they say), over a decade of medical research experience and deep knowledge of improving the physical best in all of us. His name is Dr. Mengele. Would she please consider him as the new Surgeon General?
Are people feeling ‘slightly’ sick at this particular moment? So if a transgressor of THAT magnitude is so offensive, can ministers not understand that we have a massive amount of resistance against parties like Goldman Sachs and Lehman Brothers? Some things should just not be considered. This is not emotion, this is common sense. If groups like that can debunk a generation, why trust them again?
Again I say, this is not emotion, this is common sense. My reasoning is simple. When a board member moves into such a power position, that person will surround himself/herself with the golden boys and girl that made for this to happen. It is an evolutionary step. The board member rewarded is also the golden boy/girl reward. The top of the pyramid moved to the direct vicinity of that power circle. And they would have moved a few people into their vicinity too. So whatever was done to that board of directors did not stop when they left. We are looking at a minimum of two additional circles of power, some moved up, some moved away and some stayed. But the way of thinking of those who left remained in place. That is the real danger. This could happen again!

My fears are voiced in much better way by Professor Julia Black from the London School of economics in a paper from January 2011 “The financial crisis revealed weaknesses in regulation which went far deeper than organisational structure. The new legislation alone cannot provide the solutions – but it will be an important tool for guiding the future conduct of regulators, as well as determining the name of the institution for which they will work” (Black, J, ‘Breaking up is hard to do’, 2011).
So these weaknesses go deeper than just the casual parts. This is partially visible in an article in the Guardian written by Alan Travis on October 2nd 2012 (“Labour will introduce new laws against dishonest bankers, Cooper to say”). It is interesting that this happens more than a year after the paper by Professor Black and more than 3 years after the Banking Act 2009 (I reckon they could not delay it any longer). In the article Cooper says: “Cooper says that the public looked at what had happened and had seen no real sign of people being held to account.” This was Yvette Cooper MP, the current UK Shadow Home Secretary.

Really?

Many had that feeling since 2008 when retirement funds when to the local latrine and haven’t been heard of since. For me there are a few additional issues.

1. Can this happen in Australia? (Some might say No, we are not like that, but how clearly is this set in legislation?) We should find and test this BEFORE the Australian public is presented with a multi-billion dollar write off.
2. The UK has the Fraud Act 2006 (originally part of the Theft Act). The problem here is that the word ‘Dishonest’ is a factor in each of the variations of Fraud. That has the issue that the events that lead the 2008 meltdown were not illegal. When we look at the Banking Act 2009, the criminal links are not really there. More important, since its release there have been no additions, alterations or amendments to stop the bad credit ‘solutions’ the US banks employed. So it seems to me that proper protection is still not in place. This means that the impression remains with me that the financial top can continue to get their monthly shares of luxury items, real estate and yachts. It seems that this area is not filled with loopholes; it remains nothing less than an open gate. Beyond that is the statement of Martin Wheatley in regards to LIBOR and that this had been happening since 1991 is an indication of the remaining dangers. So how safe am I in Australia from our banks playing this game?
3. Which solutions and papers can we trust? Many of them are all about concepts, approaches and possible ideas. And nearly all of them are pleading against regulators, regulations and stricter control. It seems to me that those papers are all from financial experts who want a solution without hindering their need for freedom of movement. This is in the heart of my fears.

There are leagues of papers that proclaim ideas. An example is “CRISIS MANAGEMENT AND BANK RESOLUTION QUO VADIS, EUROPE?” written by Dr Barbara Jeanne Attinger. In the conclusions section of page 47 she writes: “National special resolution regimes are capable of addressing the characteristics of credit institutions at national level. The UK regime is exemplary in this respect, as it provides an effective toolbox for bank resolution”.
We might ask her about the LIBOR issues; that in itself does not invalidate her thoughts and approach to the Banking dilemma at heart. Stronger than that, her presentation on 29th January 2013 in Copenhagen reads direct, to the point, clear and pretty brilliant. I do not need to need a finance degree to read between the lines that this is a possible approach to a solution. The part I am missing starts to be visible when get to the resolution in the context of a banking union. She mentions this and focusses on the third pillar.

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection

The first pillar is about the supervisory mechanism. From my point of view I see the specific need for a fourth pillar, which would require alignment over several nations (not all have the same acts, rules and legislations when it comes to banks).
My thoughts would go towards:

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection
• Acts of Accountability for Banks and Financial Institutions

I have seen several papers that rely on a solution without regulations. There is no way to tell who’s right here (my lack of Financial degrees gives them the advantage), yet the fact has been shown that Banks cannot be trusted, and the LIMOS scandal just adds a bucket load to that belief.
The acts need to go further than the Fraud Act and the Banking act combined. It must clearly outlaw certain acts. It must also limit rewards. The utter need for a ruling that bad bank approaches are no longer rewarded. More important, any form of reward within financial institutions should be lessened by the amount moved to a bad bank, or bad investment write-off. Something they will not want, however, consider the fact that people end up with margin profits with swapping papers. That should no longer be rewarded.
The high risk use of Interest-Rate Hedging Products (IRHP) are reported to dent their net earnings prospects in the short- to medium-term. (Quote from the Guardian) Well, if it is impeding net profits, then it should not be rewarded in any way shape or form. You want to run risks, fine, but then the bank does it risking their own capital and own finances. What are the chances the banks agree to such measures?
There is an additional issue. This is the current instalments of Goldman Sachs creativity called Bad Banks. This is nothing to attack them on, as they do not seem to be doing anything wrong or illegal. However, I feel that this escape hatch will cause a lot more damage in the short and medium term than anything else. Even long term these Bad Banks are to be seen as issues. The required change would be that until resolved, no less than 5% of annual banking revenues MUST be transferred to the bad banks from the banks that had to be created because of their actions. In additions, the commission-able revenue must be based on the remaining profits AFTER funds are transferred into the Bad Bank. The need for this is shown as the Netherlands are already reporting the need for more and more financial assistance as Bad Bank properties are placed in financial duress. So SNS can just wave it off and sail to the future? It reads like the good old British days of Wine and Jousting: “Peasant Population Taxation! For a long lasting rule of Fun and Frolic”
The next issue goes beyond this. The Bad Bank might be taken care of in some way. Perhaps McKinsey & Company picks it up. Perhaps Moret & Young takes a creative accounting dip in that pool. The LIBOR scandal is however more than just an issue at hand, it will be a debilitating complication, allowing several parties to start muddy the water, leaving a solution hanging until sometime down the track, and at present no protection seems to be in place, and none to look forward to in the short term.

I reckon the current scandals show that this is not even the end of the beginning!

Leave a comment

Filed under Finance, Law

Tagged as , , , , , , ,

February 6, 2013 · 17:56

It hurts every time, but we love it

So, in this fifth part, we will have a little look at the UK banks that were hit lately. This is a progression from previous parts. Not because they were linked (they might be, but I gave no deeper look at that). The important reason is that the banks are doing more than setting a trend. This is all a continuation when banks became more then service providing organisation. They became profit driven. Instead of the normal profit of continuation it became driven to the optional profit of speculation. Even though most banks would argue that this is the way to go, the Netherlands showed how their banks lost to the amount of 40 billion Euros. This pretty much covers more their current deficit. There is also the continuation of thought on the decision makers. How can we be allowed to sit down and see how a group of less than 100 took decisions that would cripple a nation on narrated limitations like ‘miscommunications’, ‘blunders’ and sheer incompetence? More astounding is that following the acts, some decided to look at advices from corporations losing utter fortunes (Source: Telegraaf, 31st October 2012).

This is not just about the fact that we are dependent on a very small group of people. We are confronted that they are just people, with needs and dark desires. A group having ‘ideal’ dreams and writing checks a lot larger than their ego could ever cover.

So what to do?

Let’s take a look at three groups.
The Bank of Scotland, The Lloyds banking group (of which the Bank of Scotland is now a part) and Barclays.

In 2012 the LIBOR scandal got a hold of many (London InterBank Offered Rate), There were accusations and proof was given. As LIBOR affects the US market and it was seen as a violation of American law. The UK version of the Telegraph reported that the chancellor had made it clear that any financial penalty imposed by American regulators must be paid for by bankers, and not the taxpayer. (Source: The Telegraph).

From my side the first thought was that it might be nice if the US cleans up its own side first. I wonder how much money they reclaimed from upper management at Lehman Brothers? Interesting is the information, that those upper level ‘demons’ (aka members of the board of directors) got overall half a billion dollars in bonuses. How much was reclaimed? An example of this is Erin Callan (former CFO Lehman Brothers) who did get a nice payout and if I can believe the NY Times a new husband and moved to a high position with Credit Suisse. Now the next is really important. SHE BROKE NO LAWS! (As far as we know). Also, there does not seem to be any evidence of any kind that she lied. She has been portrayed as a ‘girl’ who was in over her head. That is hard for me to comment on, but it does raise certain questions. There seems to be a board of directors who seem to play the multi-billion dollar game like it is a round of Parcheesi. To debunk a trillion dollar company and then walk away with half a billion should result in more than just global questions. That part is important as at the end there were dealings with Barclays who had a small non illegal windfall. Now business is business, yet it does show that a certain game that was played in the US seems to be played in the UK to the extent that is now the LIBOR scandal.

 

How does this link to the Netherlands and the UK?

Well, look at the reports on how percentage bases are calculated and how it reflects not on ACTUAL debt, but based on how these debts relate to Gross National Product and how these things influence the DOW. So it is in the interest for all to keep certain numbers high. Especially for the greed driven! This is the real problem from my train of thought. Considering what I wrote over the last weeks means that the Greedy need the DOW index to move higher and higher. Yet, all the numbers give me an indication, especially when we see a global depression that those numbers should not go up the way they do. It feels to me that other factors are influencing it all. The US with the fiscal cliff (Fiscal Abyss seems more accurate). Many EEC nations are in massive debt, and then hit with waves of unemployment, higher costs, declining standard of living and no direct prospect that this will improve. People are not spending the way they did. The housing market is breaking down in several nations and so on.

So consider the next nightmare. If the DOW index drops 4,000 points to 10,000. What then? Too many people seem to ignore parts, others want to control parts and those in charge want to rule, so when it does collapse, they maintain whilst none survive.

This same view seems to be happening now in the UK. The controlling of percentages to LIBOR is only a first. A lot of these reports like the one the BBC showed in August 2012 mentioned that this system must change. This was spoken by Martin Wheatley of the Financial Services Authority. He also mentioned discrepancies going back to 1991. This means that some level of manipulation has been going on for over 20 years. So is this about ACTUAL justice, or is it that the US had become SO desperate for as strong as a hand as possible that they pulled a Benedict Arnold against their own banking ‘buddies’. For the UK readers, Benedict Arnold is the American version of Edward Devenney.

Another party in LIBOR is Barclays. They dealt in services that rely on LIBOR, by intentional misrepresenting information they got better deals and therefor more profits. The problem is that using Derivatives in this way and the involved banks’ lending money to each other it becomes a musical chair exercise in passing pieces of paper from one bank to the other. From my viewpoint it could be seen as adding funny money to the internal till and amassing profits from something that was not there. And as they moved hand to hand, they kept the margin of profit that LIBOR offers.

So the following step is reforming this. The UK government seems to be happy to accept all upgrades that Martin Wheatley suggested. However, Reuters reported on the 28th of September 2012 that these changes would add volatility to the short term markets. They also reported that the FSA (the place Martin Wheatley is from) mentions that this standard is too entrenched to replace. It seems that banks on a global scale are too afraid to rock any boat. Is it a fear that their united spread sheets are altered to remove their layer of manipulating? If that is so then their powers would soon be diminished. It seems clear to me that markets are manipulated on several levels and those in charge are in no mood to change any of it. That situation becomes a lot more volatile when you consider the US debt of 17 trillion dollars in addition to the Fiscal Abyss. Those two, when a change is set might mean that the US could be bankrupted overnight.

 

Any claim that this will never happen is slightly moot. Here we now get back to the Netherlands where the same was claimed of the SNS Bank. It is now nationalised. Many nations should now be contemplating massive change to remove the power of banks as we can no longer afford THEIR life style.

It is interesting that the UK is under such scrutiny by the US, yet the US is nowhere near on cleaning its own banks (in my humble opinion). This does not mean that nothing should be done. And it does not mean that they should not have done anything. There is however the question on how those could be improved (as I have asked myself and on my blog in several situations).

So we get to the Lloyds banking group. In January 2013, 8 people were charged connected to a $55,000,000 corruption scandal. (Source: AP). This is not the only issue. Ian Fraser, an award winning Journalist, who reported amongst others for the BBC and Thomson Reuters has a lot more on his blog http://www.ianfraser.org. If anyone wants to question his education? Well the man was ‘shaped’ by St. Andrews (the University, not the Saint), which means he should be regarded as a member of the highest echelon in his profession. In addition, when we look at the board of directors of the banks we mentioned earlier, then we see more than just casual links. Some of them had positions at Citigroup, the FSA, The Royal Bank of Scotland, the US Treasury, JP Morgan Chase, International Swaps and Derivatives Association (ISDA) and more. This seems to remain a very small inner circle in-crowd.

It is clear that a lot more has happened and even more is happening. This is not even the complete story, but we have clear evidence spanning 2 continents that several nations have a collection of banks where it is all about the profit. Looking at the ‘blunders’ where they were willing to bet the house on all of it. So I feel that clear, visible and vocal oversight of these parties is a given essential need!

Please consider this last part. The UK banks involved in regard to the corruption case and the LIBOR scandal consists of 4 of the 5 large UK banks. It sounds harsh however this implies 80% of the UK banks have prosecutable issues. This is more than a scary statistic. I would take a guess that these 4 banks are controlled by boards of directors and they would add up to less than 75 persons. What happens when they in the same fashion as the Dutch SNS agree that ‘blunders’ were made? Could the UK survive a hit that large? More important will be the question whether the results also impact their siblings Canada and Australia?

Several questions and I expect that no clear answers will be forthcoming (any day soon). A political step could be in the form of carefully phrased denials and years of closed door meetings.

For me the conclusion from what I have seen over the last few weeks is that oversight is a must, there should be a clear list of definitions that the financial world must openly agree on and that there must be an open list of those involved in those standards.

As I close this final part of my reflections, the hope is that you enjoyed these five blogs.

These series were my thoughts on the Financial Banking Blunders as set in:

  • Greed and the lack of common sense.
  • Time for another collapse.
  • The future of greed.
  • A solution by annexing greed?
  • It hurts every time, but we love it.

I will try to take an evolving look at banking laws in a future blog.

2 Comments

Filed under Finance, Law

Tagged as , , , , , , , ,

February 4, 2013 · 13:29

A solution by annexing greed?

In my previous blog I took a look at certain events from the SNS bank. Here I will be taking a look at possible solutions. Before we do this we will have to take a look at certain elements that are in this bad bank. Each of these bad decisions is very costly one. Now we must look at what is needed to turn this around. We do have an additional problem. The people who blew up the financial industry (aka Goldman Sachs) had a finger in this solution!

So, can anyone explain to me why people are giving ANY LEVEL OF CREDIBILITY to ANYTHING Goldman Sachs has to offer? Please explain to me why SNS Reaal went for advice to the company who lost 2.1 billion dollars and is one of the major parties behind the 2008 financial meltdown?

OK, let’s get started.

In 2006 Bouwfonds Property Finance (BPF) was acquired. When it changed hands part went to the ABO bank, and this part became part of SNS Reaal. Now, as mentioned by NOS, this part consists of a collection of real estate projects. It is interesting that many searches did not reveal a clear list. Much information is unclear as i was not able to find a complete property list.

A. Business property.
Any business property that is part of SNS or SNS Property Finance and is currently under any mortgage where payments are not up to date kept should be annexed into a government building society for either leasing or rent (no sale allowed). The reason for sale is that sales must be very closely monitored. I fear that certain parties would jump in for a quick deal under ‘dubious’ conditions that cannot be met after a short time, prolonging all this and in the end will stack up costs again and again.

A single example is Energy Business Park Arnhem. This was under mortgage with TNC which is now bankrupt with outstanding debts in excess of 20 million Euros. This is part of TCN UROP SE en TCN Assets B.V. both also bankrupt. This is just ONE example. Loss upon loss upon loss upon bankruptcy. It looks like one building seems to contain the infrastructure for several buildings, all costs, all needing Accountants, lawyers and nothing moving forward on the profit bar. The ‘Bad Bank Inc.’ portfolio is filled with these sorts of issues.
So, let us get back to annexing. These buildings are to be confiscated. Their infrastructure gets disbanded and we try to get some of the money back. If we look at the issues over 2012, than some might remember the complaint on how some of these building directors got way too much money. Well, now they get to earn that extra by turning around some of these places.

B. Consumer properties.
This is a bit harder. Many of these places are not in the Netherlands (Spain). Yet, Spain does remain the most popular holiday choice for the Dutch. I mentioned this place before. It is Mosa Trajectum (possibly more than one project). The question becomes how far payments were made, and how much is still uncovered. If not covered then I say Annex it for the Dutch Government and let they be sold in smaller parts and at reasonable prices. I consider 600,000 Euro to be severely overpriced. Some of these villas can never be sold, however, I think to let them out as holiday bungalows, and get some of the money back that way is not too far-fetched. This is what the original owner had intended. I personally belief he was not very realistic about the approach. Yes, likely some places could be sold to others for a nice fee, and yes, it will remain a loss, but at present someone is still getting some money out of a project that he is not entitled to (if the bills were paid this project would never have made it to the bad bank stack). In addition a sharper look should be taken if there is a possibility to take these places into different directions. I already mentioned that several of these places had an amateur approach to its sale (really bad websites and such). The governments through the courts should assign these places for sale with brokers who have proven to deal in good ways. All parties who have been involved in bad mortgage dealings (no matter how non-illegal) should be auto blacklisted.

This first part is all about trying to sell Consumer properties, renting out the commercial ones. However, the difference is that I want ALL middle men and all traders removed from this financial track. They have no business in a track that made it to the bankrupt pile. They failed, good luck, goodbye and have a nice day. There should also be an additional message attached as mentioned in the sale of consumer properties. Brokers and dealers are to be held accountable. That means those in dubious actions are to be withheld from new options. Their defence that they did nothing illegal is no longer an acceptable answer. It reeks like the German defence from 1945. “we were under orders (befehl ist befehl)” We need to change without softness, the atmosphere of greed driven, vulture approach of stripping places bare and walk away with a hefty handshake, money in the bank and walking with filled pockets towards another endeavour.

We have witnessed for too long how companies operated for years under the approach of conceptual profit and ending up with no revenue. This means that the monitoring efforts of treasury and taxation must change as well. This SNS example is not alone. When we look beneath the surface we see collection of events that go in similar direction. these thoughts come from the following article from the Newspaper Trouw (meaning: faithful) reporting on the 10th of October 2006 that the sale of BPF had gone to SNS Reaal with net profits of 87 million Euro in 2005 and 46 million Euro for the first 6 months in 2006. When we look deeper at this we see two optional paths. In the first path, as presented by all matters of web publications that This person Ronald Ras would be investing 250 million Euros in building a 4 star resort. In addition he had a new investor. An American that would be providing 1000 million in funds (not one billion). And what currency is that in? The article did not mention that. This was an article in April 2012. The source was the IAGTO a golf promoting website. So where are the hard facts? When seeking through web search you can find all matters of web news. Yet, when we seek the sources we should rely on (Reuters, newspapers, on-line news providers) we see that their commitment to facts is lacking completely. This is not about going after Mr. Ras. I personally do not care about the individual. I do care about large organisations like banks that seem to provide annual reports balanced nicely, that they do NOT seem to keep a proper handle on matter. The excuse that the forms look correctly should not hold any water.

This is about solutions, and this is part of that. Banks need to start doing their proper homework. From what I have been searching, reading and discovering in the last 48 hours, it seems to me that there is a massive gap in that area. We should all agree that many facts might not be on-line. However, the parts we read on-line do not seem to add up and red flags should have been raised all over the place. It will be up to the Dutch Justice department to consider the needed steps and actual steps in calling these parties to court, to give evidence and hand over documents proving correct steps were taken. A 10 second message ‘blunders were made’ should not be allowed to cover it. For the former boss “Sjoerd van Keulen”, to silently walk away, dropping his tasks as Chairman of the Holland Finance Centre looks like a joke. The Dutch Finance minister was very outspoken into confiscating previous commissions is a stronger step, and he did mention on the NOS news (2nd Feb 2013) that parts are currently not achievable as the law changes are pending at present. Those changes would give him a lot more abilities in this matter. I would suggest that Mr. Sjoerd van Keulen is placed in a public parliamentary enquiry, where he must show evidence and answer public questions by ministers and Banking CEO’s on his choices, his actions and events. This too is aimed towards a solution. For the simple fact is that the Banks think they can just walk a nice walk. Over the last three days many sources had the same line: “SNS Reaal is the smallest of four Dutch banks designated as systemically important and too big to fail, by the Dutch central bank”. It seems that they auto assumed a government injection of cash, so that they could make a mess a little longer. I think it is important that these citizens see these people live on TV. My only worry is that not unlike the passport scandal in the late 90’s the only response given will be “I do not seem to recollect the details to those facts”. The Jurisprudential fun fare will be complete at that point, but it could push the citizens into forcefully demanding massive banking changes. That is the aim. This scares banks (well more the people receiving fat checks). As long as the people are not awake, they walk away.

The Dutch could set a tone for other governments. This would include France, Italy, Spain and the UK. The simple reason is that I feel certain that this tidal wave WILL CONTINUE! My fear is that the damage will just add and add.

So far the property branch! Let’s take a look at insurances.
Two additional sides are to be seen here.

They acquired SwissLife and Axa. Interesting was that SwissLife was purchased at 16.3 times the annual profit, totalling at 1.5 billion Euro (Source: NRC Handelsblad, a Dutch Newspaper). This happened in 2007. Now, can anyone explain to me how this was a decision anything less than utterly insane? A bank agreeing to a business matter that takes more than 15 years to break even. When I was living there I could not even get a mortgage past 3.5 annual incomes. The insane part is that it has been known to be a bad bank decision less than 4 years after purchase. So this buy was conceived by….? (I am utterly clueless how this became a reality!).

Yet, this is still about solutions. The Netherlands has a few issues with healthcare and Mental Health care, so we could unite the two. Consider the possibility to get 2,000,000 people switch now to SwissLife/Axa, which is roughly 8% of the population. Making these funds all government, we get two things.

First is that the government gets a MASSIVE financial injection. Yes, it comes at the expense that healthcare costs will go up too. Consider however that several of these funds have a board of directors with a very fancy fat check and commission. All that money will now go into the treasury. More important is that those profits could pay for the needed mental health care that is now being scrapped as there are no more funds. This is obviously not a perfect solution, but it is a possible stronger move forward. In addition, the events towards SwissLife/Axa might help to stabilise certain retirement funds. As Swiss life and Axa improve either other funds MUST do better, or their customers would move to SwissLife/Axa. This would mean that retirement funds go towards a non-commercial, government controlled side. Very much like the Swedish system. This might not be a bad idea. I will be the first to admit that many complaints will go up; however this is about more then moving forward. A fundamental change is essential here, and we might as well consider going into another direction all together. In the end if this does work, then SwissLife/Axa can be sold again for with a good profit, which is also nice to add to the empty treasury. I kept the two together as any solution for SwissLife and Axa might require a solution in the same direction.
These sides all need new and adjusted legislation. They need guarantees in place. However, consider that the people are no longer funding some person’s fat check, but it goes on the big stack benefitting all. This means that millions are already saved. Not a bad way to achieve Social Justice.

My ideas remain (highly) debatable, but I feel strongly about two sides. The first is that some financial institutions like Goldman Sachs are to be blacklisted. We seem to revisit places for advice that are at centre of the mess we got into in both 2004 and 2008. In addition, why should nations keep on funding US businesses, whilst its government will not get a decent handle on these corporations, their own debt and their own impending bankruptcy? Several experts in this field keep on claiming that rules and more regulations are not the solution. I am not sure whether they are right or wrong. I do know that those presently in charge are all about greed. THAT is a massive reason for many problems and until those people are under control, they should not have any control at all. We are heading to massive changes. Not just in Europe, but also in most Commonwealth nations. Without those greed icons we might have a chance. With them our chances are zero. In addition, I am not some Social Justice type who opposes Capitalism. I believe that Capitalism can propel any industrialised nation. But this has gone over the top. When it becomes about revenue and shares, and no longer about actual profit, there is no Capitalism! We remain with nothing more than greed and a vulture based decay. Those two I do oppose strongly.

Leave a comment

Filed under Finance

Tagged as , , , , ,

February 2, 2013 · 22:05

The future of greed.

Today another example of failing greed has become apparent. The Dutch SNS bank has been nationalised to avoid a large bank from going bankrupt and delivering millions into utter despair. It had been some time in the workings, and to be honest, they had been trying to find new investors, new finances and solutions. This solution is not what the bank wanted and not what the governments wanted, but they told us that they had no choice. There was an interested party; however they would only want to buy the bank, and not the bad sides. So they were willing to buy the cream and dump the milk.

The consequence would have been sizeable. Now the bill is close to 5 billion Euro, making the bill 220 Euro per citizen. In addition the not profit making real estate branch is placed into a bad bank that side had to be guaranteed by the government for an additional 5 billion Euro (Source: NOS). The people with investments like bonds and shares lose it all, they lost all investments. This is a unique event. I can definitely agree with the Finance minister stating that it is ridiculous that a good investment makes money, whilst a bad investment is still covered. To me this is like gambling with 0 risk. The Dutch Finance minister stated that the financial industry must accept ad deal with its own losses. Those losses are set to a total of almost 1.25 billion Euro. We can all agree that this invoice adds up to a massive amount of money. These issues do have one emerging issue. As this has never happened before, it might end up in lengthy trials, tribulations and litigations.

There is an historical side to this. This bank was founded in the early 30’s. It was a simple labourer’s bank for savings and mortgages. It was all working fine. When the bank goes public in 2006, things change fast. Through this step they obtain 1.5 billion Euro in funds. They enter a field of high risk property investments. After the 2008 crash they get an injection of an amount approaching 750 million Euro. So we are looking at a bank, who was allowed to proceed to play Las Vegas style Craps with billions and they are now a non-party. A small group of people had thrown it all away in a little over 5 years. They wasted over a billion a year and no one with authority, insight or even common sense stopped any of this. And this is just one bank! (Source of most of these numbers: NOS).

The question becomes was this bank fattened as a pig, to be handed as a roast? After an era of bad banking, of inflated accreditation and as we saw the plunge of 2008 all over the US and other places, why were these dangerous environments not handled by the respective local governments? To give an additional view, the Dutch government had deposited 34 billion into Dutch banks nationalizing those 3 banks. 11 billion has been recovered (as in paid back), yet 23 billion is still to be recovered. So this is over 1000 Euro per citizen. This is not including the bad bank side which has billions in bad property choices (read investments). This part has places all over Europe that no one seems to want to buy. I wrote about this earlier. Those exclusive places that only 0.1% could afford, and those people do not want to be close to one another.

The issues of SNS Reaal were described as a stacking of blunders and mismanagement. This is not the first but the third bank that had to be saved using taxpayers money. This should lead to overwhelming questions as to WHY there is such reluctance to keep a better watch on this group of people. The UK has its own demons on this field, the Lloyd banking group to name but one.

The Huffington Post UK Charlie Thomas wrote: “The chairmen of five of the high street’s biggest banks today appealed to their industry to accept their wrongdoing and continue work to rebuild a sense of trust with the public.”
That does not even sound funny. That thought has two massive issues.

1. The issue at hand is more then not distorted, and there is NO clear message at all where the mistake were made, what corrections are made and how it will be prevented in future. That entire operation is a story of unclear messages. There seems to be no clear person to hold accountable (not as in blaming, but as in cleaning it up). Charlie Thomas also quoted Sir Philip Hampton, chairman of the Royal Bank of Scotland group, quoting: “At the core of our bank, there’s never been anything wrong with it – we did lots of stupid things, but once we’ve rectified those silly things we’ll be in a good position.”
Well from that point Sir Thomas I would like to point out that these bungles are too often greed driven and as such a no-one-to-blame policy sounds very grown up, yet the driving spears of those star chambers remain untouchable and oversight is in my humble opinion one of the few remaining options.

2. Over the last few years these banks, namely the banks in the EEC messed up (or let’s just call it plainly mismanaged) for an amount of many billions of dollars. How long can we allow for back-door dealings between governments and banks? How long until these levels of mismanagement are translated into complete confiscation of goods and owning from those in charge and then if debt remains added long term prison sentences? The UK used to hang people for highway robbery. Those of lesser crimes, like stealing bread, would find themselves on a paid holiday trip to penitential Australia (now a major Commonwealth nation far from the UK). So what are these banks doing? Should it be seen as nothing less than highway robbery, or was it a massive heist? The simple heist of all bread from all the people?

Now, I will admit, that at present, I seem to be no better than others. However, this is only part 1. In my next blog, in part 2 of this blog, I will look at possible solutions. What can we do? I would especially like to look at the options, currently within the bad bank called the Property ranch of the SNS Bank. What could be done to limit the damage?

2 Comments

Filed under Finance

Tagged as , , , , ,

January 30, 2013 · 18:54

Time for another collapse

We have all seen the state of matters on many nations. Including Australia loads of nations are in a massive downturn. America keeps on spending money they do not have. Spain is fighting a massive wall of unemployed (over 24%). Greece is fighting just about everything from no longer payable debts and unemployment figures to phantoms of their past. In addition to this France, Italy and Ireland have issues with both debts and people somewhat not working. Last but not least, the Dutch economy is at a low and they are about to change the current Monarch. Add to this the referendum that is at the heart of the UK, will they remain in the EEC. All these are questions that hold matters that stop an upturn of their economy. These are bleak times indeed.

So can anyone explain to me that the Dow keeps rising? (Seriously, I am not an economist!)

Apart from a dip around January 8th there is no real upturn in the US. They have their issues around budgets, around 7.8% in America does not have a job, their export is not what it needs to be and it seems that their numbers are not what they appear to be. Citing a newscast where the following was stated “The US unemployment rate falls to 7.7% thanks to the reduction in the labour force.” So from that we could consider that yes, there are less unemployed, those people did not get a job, they became pensioners. What other misrepresentations are they making? Now, let’s be honest. They are not doing anything wrong, not just because it is done by all, but because they are clinically speaking the truth. Yet, considering these truths, the question remains. Why is the Dow Index going up and up and up?

Are we about to get hit with a 3000 point drop, and if so, who’s wealth will fall away, the banks and bankers or the retirement funds? It feels like America has adopted a Japanese way. The way of the ‘Yes’ people! Hai!

Americans shy away from bad news. They go play Possum, they ignore, they reject. There is no fight for improvement, there is no middle ground. It is only Victory or Apathy, and victory is a term used often and mostly never deserved. Lately we see messages like this: “Just one hour before midnight on New Year’s Day, the U.S. House of Representatives approved a one-year renewal of federally-funded Emergency Unemployment Compensation (EUC)”. Decisions of the 11th hour! Even issues on the fiscal gap are deadlocked. Moving forward is not just hard to do, it seems impossible to some to make the hard calls. If they like victory stories that much, they should take a look at Germany. Just so that readers are up to speed, let’s take a little walk on the historical side.

June 7th 2010 “The German government on Monday announced plans to reduce spending by €80 billion ($95.7 billion) by 2014 in the largest package of cuts since World War II” (Source: Die Spiegel)

There was a lot of commotion. Several nations called it overreaction, some called it nonsense. In an IEX article on Macro economy they all mentioned how Germany is such a worry. They even quoted George Soros as a source of it as he spoke at a University in Berlin. How irresponsible these cut backs were. Yet, now Germany has a strong economy, much stronger than anyone else in Europe. I wonder if they saw through the Megalomania of George Soros. It had been advocated by people like Glenn Beck for a while. It seems to me that on a planet of debt, those who own money, those who are in the favour of banks would be in charge of the planet. It is one way of making governments flaccid to your actions; they desperately need what you could spend in their country.

Yet, I am digressing from the issue, which remains the Dow index. Germany remains the only one who fought back these debts with success. It stands to reason that the Dow should not be this strong. Consider that the Dow is fully called “The Dow Jones Industrial Average”. Now consider the unemployment levels which is up and the spending ability which is down. Both elements are off on a global scale.

So how come that this index keeps on rising? What artificial flavours are added?

Now consider that the debt of most nations is based upon Gross National Product (GNP), now consider this falls, which means that the debt quickly rises as per example below.

GNP = $1B, debt is set at 3%, which means that the actual debt is $30M.

Now consider that next year, the GNP is only $700M, which means with a debt of $30M the debt is now 4.28%. This is far more than their agreed and allowed margins of debt. Is this why the Dow is rising? To keep debt percentages low? Also consider that most debts are not millions, but often billions, and in one case many trillions.

You might wonder. Does this matter? Yes, it does for two reasons.

1. The same applied to people with debts in the US. And then in 2004-2008 one in six in the US lost their houses as their spread sheets stated an overly large debt. Why should this not apply to governments? Why are they not accountable for their actions (or better inactions).

2. We seem to be getting that ‘we are still OK’ message, while the impression seems to be that some people are cooking the books (or slightly more precise, they seem to be cooking the percentages).

So the question becomes when it happens (not if it happens) that Dow number slices down to 10,000 or less, who is kept holding the bag?

5 Comments

Filed under Finance, Law

Tagged as , , , , , ,